QANTAS AIRWAYS—A NEW WAY TO COMPETE

THE PROBLEM
In 1999 and 2000, rising fuel costs placed pressure on the airline industry. Increased fuel prices arrived quickly and without warning. For Qantas Airways (qantas.com.au), Australia’s largest airline, the increase in fuel prices was just one of several problems. The airline faced two new domestic competitors, Impulse and Virgin Blue, as well as higher fees at Sydney Airport. In 2001 traffic dwindled, especially after the September 11 disaster. In addition, the airline needed to upgrade its fleet to stay competitive, replacing aging aircraft and purchasing new 500-seat planes. Finally, the Australian economy slowed down in 2000 and 2001, and the Australian dollar was sinking against the U.S. dollar. Can Qantas, the world’s second-oldest airline, survive against such business pressures?

THE SOLUTION
In addition to traditional responses, such as buying fuel contracts for future dates, Qantas took major steps to implement electronic commerce (e-commerce, EC), which involves buying, selling, and exchanging goods, services, information, and payments electronically. Qantas undertook a number of major initiatives :

Joined Airnew Co., a procurement business-to-business (B2B) electronic-marketplace (e-marketplace), that links dozens of major airlines with suppliers of fuel, fuel services, flight maintenance services, catering, and other services and suppliers. The e-marketplace uses electronic catalogs and conducts a variety of auctions.

Joined Corprocure.com.au together with 13 other large corporations in Australia to electronically purchase general goods and services, such as office supplies, light bulbs, and maintenance services.

Formed a Pan-Pacific electronic marketplace that provides a full spectrum of travel services (airline tickets, hotels, cars, etc.). This e-marketplace provides products and services to business partners, such as travel agencies, who can use the same marketplace to sell directly to individual consumers. This type of transaction is known as a business-to-business-to-consumer (B2B2C) transaction.

Qantas also implemented the following EC activties :

Sends e-mails to all 2.4 million of its frequent-flyer members, inviting them to book a flight online. As an incentive to book online, customers are rewarded with mileage bonuses and an opportunity to win $10,000 AU.

Provides information on arrival and departure times, as well as flight delays, to travelers via mobile phones and other wireless devices.

Increases brand visibility by providing online training to travel agents

Assists in the training of its 30,000 employees in 32 countries via Qantas College Online. This program is part of Qantas’s business-to-employees (B2E) initiative (qfcollege.edu.au).

Operates a credit union with 50,000 members worldwide (another B2E project). Members make over 100,000 transactions a month at qantascu.com.au. Services are comparable with those of commercial online banks.

THE RESULTS
Leading an old-economy company into e-commerce is not easy. It requires changing existing organization structures and processes and fitting new-economy strategies with old-economy ways of thinking. Qantas knows that this is the path it must take. Results are not expected overnight. It will take years and hundreds of millions of dollars to implement these and dozens more EC initiatives. Yet, Qantas expects to see an estimated $85 million AU in cost reductions per year by 2003. It also expects to increase annual revenues by $700 million from nontravel sales. One piece of bright news for Qantas is that it has successfully outlasted competitor Impulse, which went out of business in 2001.

WHAT WE CAN LEARN…
As the story about Qantas demonstrates, traditional brick-and-mortar companies are facing increasing competitive and other environmental pressures. A possible response to these pressures is to introduce a variety of e-commerce initiatives that can reduce costs, increase customer service, and open markets to more customers.